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Company Town News (breaking paywalls, we ain't all rich)
« on: June 08, 2020, 10:28:33 AM »
The American Economy is Still Imploding

The Headlines are Wrong. The Numbers are Misleading. The Economy’s Still in Deep Trouble.

umair haque

I was surprised to read today — as you were, perhaps — that the American unemployment rate fell in May, to 13 percent or so. Too surprised. I frowned, and thought to myself: “that can’t be right.” It didn’t make sense, tally with…reality. I didn’t trust it — because it just didn’t seem possible. Data isn’t something that we should ever treat as God-given — when it fails to represent the reality we see with our own eyes, we can and should question it.

So I began to do the research, and lo and behold:

“Some temporarily jobless workers were characterized as ‘employed’ in May; had they been counted correctly, the Department said, the unemployment rate would have topped 16%.”

The unemployment rate — the real one — is higher than 16%. Now, that makes sense. How many people do you know that have been furloughed or laid off? Hasn’t America been swept by an economic tsunami? The true unemployment rate isn’t falling; it’s climbing. Not my opinion — the government’s own admission. That is a big deal. Not a small one. I want to stress what a big mistake this is. You’re reading, by now, over and over again, in headline after headline, article after article, that the unemployment rate fell. But…it didn’t.

So how high is it? My guess is it’s about 20% at the moment. Then why is the figure of 13% being reported as a headline? Lazy journalism, I guess, or bad economics, or both. Why was it reported instead of the correction? Was it just politically convenient? I don’t know. I’m not a cynic. What I do know is that when the Department of Labour itself says that the real unemployment rate is higher than the headline…and no one seems to report it…a nation is being given a false picture of the economy, and how it’s really doing.

The American economy is still imploding.
Bad data, and thinking based on it, doesn’t help. It only prevents seeing the problem. An unemployment rate that the government itself admits is rising to higher than 16% — but won’t say just how high — is only one kind of vivid proof of that.

Evidence is beginning to emerge of three things that I and every good economist have feared — three ways that catastrophe becomes economic depression, by way of a widespread loss of confidence in its ability to produce decent lives, higher living standards, and anything close to stability, instead of chaos, despair, and ruin.

First, even what shrinking number of decent jobs there were left in the American economy are still being replaced by low-income, go-nowhere, dead-end ones — at an even faster rate now. What jobs were added in May were mostly in “low income service jobs” — hospitality and restaurants. That is because mega-corporations in particular have used the pandemic as an opportunity for the “cost-savings” that the American economy has become famous for. Maybe we can do without this set of managers, those accountants, these analysts, those branches, that whole branch businesses. Bang! There go legions of jobs, never to return. They’re transformed, instead, into “low-income service jobs.”

Do you know what percentage of the economy is already “low-income service work”? Prepare to be shocked. About half.
Something close to half of Americans work in dead-end, go-nowhere jobs, that usually come with no benefits, protections, or guarantees, whether pensions, decent healthcare, retirement, and so forth. Worse, this kind of work never offers rising incomes. You work for minimum wage — or less in many states, where “tips” count as formal earnings. The result is that unlike yesteryear’s jobs, a person’s income never rises. They just go on eking out a living most of their lives.

That’s the second thing that I and most good economists have feared — that this pandemic would harden wage stagnation, and amplify inequality
. What happens when more than 50% of Americans work low-income service jobs? Economically speaking, three things do. One, because incomes never rise, people accumulate no savings. Two, as incomes flatten, debt explodes. Three, as debt explodes, living right at the edge of bankruptcy becomes the new normal. That’s already where 80% of Americans are, living paycheck to paycheck. More than 50% of Americans working low-wage service jobs is going to push that already nightmarish statistic past breaking point. Maybe 90% of Americans will end up living at the edge. Maybe 95% will. Those are not numbers that can be called anything like a prosperous economy — even if the stock market booms, and Jeff Bezos and Zuck go on earning billions.

What happens to a nation of people whose incomes never rise? That brings me to the third thing that I’ve feared, right along with most good economists. Social upheaval. Political instability. The breakdown of society. You might say, looking at America, with a hundred thousand dead, and a lunatic in the Oval Office — “Buddy, we’re already there!” You’re right.

But this instability has been caused by yesterday’s broken economy. Sure, the stock market boomed, and the rich got richer. But behind the curtain — where too few cared to look — or maybe under the rug, terrible things were happening. The average American now died in debt, as — around 2010 or so — the middle class became a minority, for the first time in modern history.

American media doesn’t seem to understand the gravity of this statistic, so let me spell it out. The last time an entire nation died in debt, Weimar Germany became Nazi Germany. Germans owed unpayable debts to France and Britain. They couldn’t pay them. They fell into poverty. Amidst the chaos, Nazism arose. Hitler and his gang blamed the economic woes of the average German on…Jews. But Jews had nothing whatsoever to do with them. So what? The average German was spellbound by this story, this myth. And the rest is history — one of its grimmest chapters. Weimar Germany’s social collapse into Nazi Germany had economic roots. In the average German dying in debts he could never pay.

America is undergoing exactly the same process right now. The average American is saddled by debts he cannot repay. First, it’s “lunch debt,” then it’s “student debt,” then it’s credit card and mortgage debt, which becomes “medical debt.” The ones in quotes don’t even exist in other rich countries today. The only difference between Weimar Germany and America 2020 is that Americans don’t owe debts to other countries — they owe them to their own super-rich. The process is exactly the same. American incomes are now too low for the average American to ever pay off his debts.

The result is desperation, fear, anxiety, and rage. And so the socioeconomic effect is precisely the same as it was in Weimar Germany.
A crushing, staggering kind of social collapse, into hate, violence, and ruin. A demagogue emerged, who blamed the economic woes of the average American — which were very real — on Mexican, Latinos, Jews, Muslims, all of whom have nothing whatsoever to do with those woes. Trumpism was a direct consequence of America’s broken economy — and the American elite’s profound denial that it was and is broken.

Think about where America is today. Soldiers on the streets of Washington DC? A President calling for people to be shot in the streets? A nation terrorized? A world horrified by all this? It can all — all — be traced back to that single fatal statistic, the average American now dying in debt. That is how momentous — and how predictive, too — that figure is.

So what does it tell us, about the future? That if the average American keeps dying in debt, more and more social collapse is on the horizon. That today’s Donald Trump will be tomorrow’s Ivanka or Eric or worse. That American authoritarianism isn’t some kind of temporary anomaly, but that it’s here to stay. Nations don’t withstand economic tides. They’re like tsunamis. There’s no protection from them. There’s only prevention.

What kind of prevention? The stimulus that Congress passed supported American households and business for just one week. After that, businesses were given loans, to help tide them over. But a loan that keeps piling up debt — when Americans’ debt is already unpayable — isn’t much good. It only helps you go bankrupt that much faster.

Customers aren’t returning. The experience of states who reopened early, like Georgia, has been palpable. You can force people “back to work” — one reason the unemployment rate hasn’t hit 25% yet. But you can’t make anyone spend money. That’s what the chart above says. It’s more important than unemployment, because it’s predictive. At many stores and businesses, drop-offs of customers of 50% or more are still very much the norm.

People are staying home for three reasons. One, the pandemic is still spreading, and sane people don’t want to get sick. Two, people have been laid off, and they don’t have money to spend. Three, they’re prioritizing all those unapayable debts.

Confidence hasn’t returned to the economy.
In fact, there’s no real sign of confidence returning to the economy. Debt-saddled Americans, who already live at the edge, are being pushed over it, by the inadequate government response to a pandemic. As a result, spending isn’t recovering, and unemployment — the real rate — is still rising.

All that calls for what I and ever other good economist have literally been begging for. More, bigger stimulus. What should you do if you see unemployment still rising and spending still falling? If you don’t want depression to be your fate, you must stimulate. This time, for longer than the equivalent of one week.

America is sleepwalking into a depression. The hype in the headlines is just that, hype. Glance just the tiniest bit deeper, and the truth is troubling. The economy is still imploding. All it’s key indicators are still blinking red. Nothing, right about now, is being done about it. And that, my friends, is a recipe for social collapse to lengthen, harden, and twist into the stuff of epic tragedy.

June 2020
Under ideal conditions of temperature and pressure the organism will grow without limit.


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